Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

problem 1: Six years ago, you made a fully amortizing, thirty year, fixed rate mortgage for $350,000 at 4.5% and 80% LTV. Since then, the house has appreciated by a total of 20%. Assume you only ever made scheduled payments on the loan.

a) What was the value of your house 6 years ago when the mortgage was made?

b) What is your current equity? Your current LTV?

c) How much could you borrow today, if you wanted your new total loan-to-value to be 80%?

d) Suppose you want to borrow the amount in (c), on top of your current debt. Today, rates on 80% 24 year mortgages are 5.5%. What would have to the rate on a 24 year HEL for you to prefer keeping the old loan plus the HEL? Assume you will keep all mortgages for their full (remaining) term and only pay the scheduled amounts, and that there are no lender fees.

e) How does your answer in (d) change if the original loan had a 2% prepayment penalty?

problem 2: A property is available for sale that could normally be financed with a fully amortizing $80,000 loan at a 10% rate with monthly payments over a 25 year term.

a) What would be the monthly payments with “normal” financing?

b) The builder is offering the buyers a mortgage that would reduce the payments in (a) by 50% for the first year and by 25% in the second. After the second year, the mortgage reverts to the regular monthly payments for the remainder of the term. How much would the builder have to give the bank to buy down the payments as described?

c) Would you recommend the property be purchased if it was selling for $5,000 more than similar properties that do not have the buy-down available?

problem 3: An investor has owned a property for 15 years, the value of which is now $200,000. The balance on the original loan is $100,000 and the monthly payments are $1,100 with 15 years remaining. He would like to obtain $50,000 in additional financing. A new first mortgage for $150,000 can be obtained for at a 12.5% rate and a second mortgage for $50,000 at a 14% rate with a 15 year term. Alternatively, a wraparound loan for $150,000 can be obtained at 12% and for a 15 year term. All loans are fully amortizing and ignore taxes and fees.

a) Which alternative should the investor choose?

b) What is the wrap mortgagee’s return on investment?

problem 4: You always have had a very high FICO score. A bank has owned your fixed rate, fully amortizing 30 year loan for 10 years. The original principal was $300,000 with a note rate of 3.5%, and you only ever made scheduled payments. Current 20-year mortgages for prime borrowers are 6%. Ignoring prepayment effects, at what discount to face could the bank sell your mortgage for in the secondary market?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M92430

Have any Question? 


Related Questions in Basic Finance

1 what are the advantages to a home buyer of a graduated

1. What are the advantages to a home buyer of a graduated payment mortgage? 2. What is the major constraint on lenders in setting new interest rates for an adjustable rate mortgage? 3. Discuss the quality of the major in ...

Cost estimation and budgetingan important aspect of cost

Cost Estimation and Budgeting An important aspect of cost budgeting is personnel. A current professional issue in the engineering field is companies using contract engineers like employees but refusing to actually make t ...

Go to the cbot web site httpwwwcbotcom and determine the

Go to the CBOT Web site (http://www.cbot.com), and determine the contract specifications for Dow Jones Industrial Average futures. Determine the current futures price for the next available contract month. What would you ...

Question 1 - planning and strategic inputbriefcompany x is

Question 1 - Planning and strategic input Brief: Company X is a department Store with 100outlets, selling a wide range of household and clothing products. Traditionally they have used Press advertising to drive awareness ...

Ac corp currently uses no debt and its beta is 120

ABC Corp. currently uses no debt and its beta is 1.20. Further, ABC's CFO is considering moving to a capital structure with 40% debt. Assume the company's current ROE is 10.0%, its tax rate is 35.0%, the risk free rate a ...

One of the behavioral research case studies in this chapter

One of the Behavioral Research Case Studies in this chapter involved Agocha and Cooper's (1999) study of partner characteristics and intentions to practice safe sex. Below are the Pearson correlations between the lik ...

1 in what ways are experimental research designs preferable

1. In what ways are experimental research designs preferable to correlational or descriptive designs? What are the limitations of experimental designs? 2. What is the purpose of random assignment to conditions? 3. Descri ...

Abc company claims that the proportion of its employees

ABC Company claims that the proportion of its employees investing in individual investment accounts is higher than national proportion of 50%. A survey of 100 employees in ABC Company indicated that 58 of them have inves ...

Does depreciation affect cash flow in a positive or

Does depreciation affect cash flow in a positive or negative manner? From a net present-value perspective, why is accelerated depreciation preferable? Is it acceptable to utilize one depreciation method for tax purposes ...

The bermuda triangle store pays a constant dividend last

The Bermuda Triangle Store pays a constant dividend. Last year, the dividend yield was 5.4 percent when the stock was selling for $15 a share. What must the stock price be today if the market currently requires a 3.8 per ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro